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INDIA: Renault-Nissan to double Chennai production by 2016 - report

By Graeme Roberts | 21 May 2012

Renault-Nissan will double the number of cars produced at its Chennai plant to nearly 800,000 units by 2015-2016, a local media report said.

To compete with Maruti and Hyundai, the company plans to launch at least 20-22 cars from across all categories in the next four to five years. The plan is to be in all segments from entry-level cars to SUVs. Renault-Nissan is depending on 'badge engineering' as a key strategy for the new product line, reported Economic Times of India.

The automaker plans to 'cross badge' the Nissan Sunny, Renault Duster and Nissan Evalia to cut down on development cost and launch lead time and Renault products will be priced higher.

Nissan India managing director Takayuki Ishida said: "We increased production capacity from 200,000 units per year to 400,000 from April 2012. As demand increases in local and export markets, we keep exploring options of expanding the business."

Chennai will be expanded but Renault-Nissan is also considering locations like Gujarat, Karnataka and Maharashtra.

"It's too early to comment on any specific capacity creation or locations for new investment, if any," said Ishida.

VG Ramakrishnan, senior director automotive at consultants Frost & Sullivan, considers the target to be ambitious. "The plan looks too aggressive for someone who has just entered the Indian market. Taking on leaders like Maruti and Hyundai will be a tough task. On the production front, they have done a smart thing by sharing cost on manufacturing and development but creating a distinctive brand image in the minds of the consumer will be the key towards achieving their goal," said Ramakrishnan.

The joint venture plans to manufacture 300,000 cars of which around 70% will be exported. However, in the near future, the plan is to increase domestic sales volume and reduce the exports to 30-40%.

Renault-Nissan has an R&D centre in Chennai that has over 2,000 engineers and technicians working on several projects for the joint venture's domestic and global operations. The company aims to achieve 90-95% localisation by next year.

The company has also invited over 100 vendors to source locally and is in the process of establishing a component validation centre at its R&D facility in Chennai. 60% of the 225 suppliers companies are already located in Chennai and 25 more are anticipated to arrive soon.

The Indian market is strategically important for Nissan to achieve its Power 88 plan through which it aims to get 8% global market share and 8% profitability by 2016. The automaker also aims to have 450 dealers by then.